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Risk Management
 12 Months Ended
Dec. 31, 2021
Text block [abstract]  
Risk Management
Note 8     Risk Management
The Company’s policies and procedures for managing risks of financial instruments are disclosed in denoted components of the “Risk Management and Risk Factors” section of the MD&A for the year ended December 31, 2021. These MD&A disclosures are in accordance with IFRS 7 “Financial Instruments: Disclosures” and are an integral part of these Consolidated Financial Statements.
(a) Credit risk
Credit risk is the risk of loss due to inability or unwillingness of a borrower, or counterparty, to fulfill its payment obligations. Worsening regional and global economic conditions, segment or industry sector challenges, or company specific factors could result in defaults or downgrades and could lead to increased provisions or impairments related to the Company’s general fund invested assets, derivative financial instruments and reinsurance assets and an increase in provisions for future credit impairments that are included in actuarial liabilities.
The Company’s exposure to credit risk is managed through risk management policies and procedures which include a defined credit evaluation and adjudication process, delegated credit approval authorities and established exposure limits by borrower, corporate connection, credit rating, industry and geographic region. The Company measures derivative counterparty exposure as net potential credit exposure, which takes into consideration
mark-to-market
values of all transactions with each counterparty, net of any collateral held, and an allowance to reflect future potential exposure. Reinsurance counterparty exposure is measured reflecting the level of ceded liabilities.
The Company also ensures where warranted, that mortgages, private placements and loans to Bank clients are secured by collateral, the nature of which depends on the credit risk of the counterparty.
An allowance for losses on loans is established when a loan becomes impaired. Allowances for loan losses are calculated to reduce the carrying value of the loans to estimated net realizable value. The establishment of such allowances takes into consideration normal historical credit loss levels and future expectations, with an allowance for adverse deviations. In addition, policy liabilities include general provisions for credit losses from future asset impairments. Impairments are identified through regular monitoring of all credit related exposures, considering such information as general market conditions, industry and borrower specific credit events and any other relevant trends or conditions. Allowances for losses on reinsurance contracts are established when a reinsurance counterparty becomes unable or unwilling to fulfill its contractual obligations. The allowance for loss is based on current recoverable amounts and ceded policy liabilities.
Credit risk associated with derivative counterparties is discussed in note 8(d) and credit risk associated with reinsurance counterparties is discussed in note 8(i).
(i) Credit exposure
The following table presents the gross carrying amount of financial instruments subject to credit exposure, without considering any collateral held or other credit enhancements.
 
As at December 31,
  
2021
     2020  
Debt securities
                
FVTPL
  
$
189,722
 
   $ 183,061  
AFS
  
 
33,097
 
     35,663  
Other
  
 
1,320
 
     –  
Mortgages
  
 
52,014
 
     50,207  
Private placements
  
 
42,842
 
     40,756  
Policy loans
  
 
6,397
 
     6,398  
Loans to Bank clients
  
 
2,506
 
     1,976  
Derivative assets
  
 
17,503
 
     27,793  
Accrued investment income
  
 
2,641
 
     2,523  
Reinsurance assets
  
 
44,579
 
     45,836  
Other financial assets
  
 
6,242
 
     6,156  
Total
  
$
  398,863
 
   $   400,369  
As at December 31, 2021, 97% (2020 – 97%) of debt securities were investment grade-rated with ratings ranging between AAA to BBB.
(ii) Credit quality
Credit quality of commercial mortgages and private placements
Credit quality of commercial mortgages and private placements is assessed at least annually by using an internal rating based on regular monitoring of credit-related exposures, considering both qualitative and quantitative factors.
A provision is recorded when the internal risk ratings indicate that a loss represents the most likely outcome. These assets are designated as
non-accrual
and an allowance is established based on an analysis of the security and repayment sources.
The following table presents the credit quality of commercial mortgages and private placements.
 
As at December 31, 2021
   AAA     AA     A     BBB     BB     B and lower     Total  
Commercial mortgages
                                                        
Retail
  
$
113
 
  
$
1,340
 
  
$
5,179
 
  
$
1,936
 
  
$
228
 
  
$
2
 
  
$
8,798
 
Office
  
 
56
 
  
 
1,256
 
  
 
6,004
 
  
 
1,291
 
  
 
87
 
  
 
40
 
  
 
8,734
 
Multi-family residential
  
 
557
 
  
 
1,869
 
  
 
3,771
 
  
 
767
 
  
 
32
 
  
 
–
 
  
 
6,996
 
Industrial
  
 
47
 
  
 
376
 
  
 
2,808
 
  
 
328
 
  
 
–
 
  
 
–
 
  
 
3,559
 
Other
  
 
212
 
  
 
1,010
 
  
 
787
 
  
 
956
 
  
 
47
 
  
 
–
 
  
 
3,012
 
Total commercial mortgages
  
 
985
 
  
 
5,851
 
  
 
18,549
 
  
 
5,278
 
  
 
394
 
  
 
42
 
  
 
31,099
 
Agricultural mortgages
  
 
–
 
  
 
–
 
  
 
119
 
  
 
242
 
  
 
–
 
  
 
–
 
  
 
361
 
Private placements
  
 
976
 
  
 
5,720
 
  
 
16,147
 
  
 
16,220
 
  
 
1,161
 
  
 
2,618
 
  
 
42,842
 
Total
  
$
1,961
 
  
$
11,571
 
  
$
34,815
 
  
$
21,740
 
  
$
1,555
 
  
$
2,660
 
  
$
74,302
 
               
As at December 31, 2020   AAA     AA     A     BBB     BB     B and lower     Total  
Commercial mortgages
                                                        
Retail
   $ 110     $ 1,339     $ 4,761     $ 2,242     $ 168     $ 1     $ 8,621  
Office
     66       1,297       5,948       1,174       164       20       8,669  
Multi-family residential
     613       1,675       2,896       582       33       –       5,799  
Industrial
     25       320       2,353       259       3       –       2,960  
Other
     238       966       914       984       355       7       3,464  
Total commercial mortgages
     1,052       5,597       16,872       5,241       723       28       29,513  
Agricultural mortgages
     –       –       127       77       106       –       310  
Private placements
     1,061       4,829       15,585       15,825       1,206       2,250       40,756  
Total
   $   2,113     $   10,426     $   32,584     $   21,143     $   2,035     $   2,278     $   70,579  
Credit quality of residential mortgages and loans to Bank clients
Credit quality of residential mortgages and loans to Bank clients is assessed at least annually with the loan being performing or
non-performing
as the key credit quality indicator.
Full or partial write-offs of loans are recorded when management believes that there is no realistic prospect of full recovery. Write-offs, net of recoveries, are deducted from the allowance for credit losses. All impairments are captured in the allowance for credit losses.
The following table presents credit quality of residential mortgages and loans to Bank clients. 
 
 
 
 
2021
 
 
    
 
 
2020
 
As at December 31,
 
Insured
 
 
Uninsured
 
 
Total
 
 
 
 
 
Insured
 
 
Uninsured
 
 
Total
 
Residential mortgages
 
 
 
 
 
 
 
Performing
  
$
7,264
 
  
$
13,272
 
  
$
20,536
 
           $ 6,349     $ 13,980     $ 20,329
 
Non-performing
(1)
  
 
6
 
  
 
12
 
  
 
18
 
             9       46       55
 
Loans to Bank clients
                                                      
 
Performing
  
 
n/a
 
  
 
2,506
 
  
 
2,506
 
             n/a       1,976       1,976
 
Non-performing
(1)
  
 
  n/a
 
  
 
–
 
  
 
–
 
             n/a       –       –
 
Total
  
$
 
 
7,270
 
  
$
 
 
15,790
 
  
$
 
 
23,060
 
           $
 
 
  6,358     $
 
 
  16,002     $
 
 
  22,360
 
 
 
(1)
Non-performing
refers to payments that are 90 days or more past due.
The carrying value of government-insured mortgages was 14% of the total mortgage portfolio as at December 31, 2021 (2020 – 13%). Most of these insured mortgages are residential loans as classified in the table above.
(iii) Past due or credit impaired financial assets
The Company provides for credit risk by establishing allowances against the carrying value of impaired loans and recognizing impairment losses on AFS debt securities. In addition, the Company reports as impairment losses certain declines in the fair value of debt securities designated as FVTPL which it deems represent impairments due to
non-recoverability
of due amounts.
The following table presents past due but not impaired and impaired fin
a
ncial assets.
 
    Past due but not impaired        
As at December 31, 2021
   Less than
90 days		     90 days
and greater		     Total     Total
impaired		  
Debt securities
                                
FVTPL
  
$
20
 
  
$
–
 
  
$
20
 
  
$
2
 
AFS
  
 
–
 
  
 
–
 
  
 
–
 
  
 
–
 
Private placements
  
 
63
 
  
 
–
 
  
 
63
 
  
 
175
 
Mortgages and loans to Bank clients
  
 
61
 
  
 
–
 
  
 
61
 
  
 
51
 
Other financial assets
  
 
261
 
  
 
47
 
  
 
308
 
  
 
–
 
Total
  
$
405
 
  
$
47
 
  
$
452
 
  
$
228
 
     
    Past due but not impaired        
As at December 31, 2020   Less than
90 days		     90 days
and greater		     Total     Total
impaired		  
Debt securities
                                
FVTPL
   $ –     $ –     $ –     $ 54  
AFS
     –       –       –       1  
Private placements
     30       –       30       170  
Mortgages and loans to Bank clients
     66       –       66       69  
Other financial assets
     56       58       114       2  
Total
   $   152     $   58     $   210     $   296  
The following table presents gross carrying value and allowances for loan losses for impaired loans.
 
As at December 31, 2021
   Gross
carrying value		     Allowances
for loan losses		     Net carrying
value		  
Private placements
  
$
197
 
  
$
22
 
  
$
175
 
Mortgages and loans to Bank clients
  
 
73
 
  
 
22
 
  
 
51
 
Total
  
$
270
 
  
$
44
 
  
$
226
 
       
As at December 31, 2020   Gross
carrying value		     Allowances
for loan losses		     Net carrying
value		  
Private placements
   $ 249     $ 79     $ 170  
Mortgages and loans to Bank clients
     97       28       69  
Total
   $   346     $   107     $   239  
The following table presents movement of allowance for loan losses during the year.
 
   
2021
           2020  
For the years ended December 31,
   Private
placements		     Mortgages
and loans to
Bank clients		     Total           Private
placements		     Mortgages
and loans to
Bank clients		     Total  
Balance, January 1
  
$
79
 
  
$
28
 
  
$
 
 
107
 
           $   4     $   16     $   20  
Provisions
  
 
14
 
  
 
12
 
  
 
26
 
               94       31       125  
Recoveries
  
 
(58
) 
  
 
(16
) 
  
 
(74
) 
             (6 )        (6)         (12 ) 
Write-offs
(1)
  
 
(13
) 
  
 
(2
) 
  
 
(15
) 
               (13 )      (13 )      (26 ) 
Balance, December 31
  
$
  22
 
  
$
  22
 
  
$
  44
 
           $ 79     $ 28     $   107  
(1)
Includes disposals and impact of changes in foreign exchange rates.
 
(b) Securities lending, repurchase and reverse repurchase transactions
The Company engages in securities lending to generate fee income. Collateral exceeding the market value of the loaned securities is retained by the Company until the underlying security has been returned to the Company. The market value of the loaned securities is monitored daily and additional collateral is obtained or refunded as the market value of the underlying loaned securities fluctuates. As at December 31, 2021, the Company had loaned securities (which are included in invested assets) with a market value of $564 (2020 – $889). The Company holds collateral with a current market value that exceeds the value of securities lent in all cases.
The Company engages in reverse repurchase transactions to generate fee income to take possession of securities to cover short positions in similar instruments and to meet short-term funding requirements. As at December 31, 2021, the Company had engaged in reverse repurchase transactions of $1,490 (2020 – $716) which are recorded as short-term receivables. In addition, the Company had engaged in repurchase transactions of $536 as at December 31, 2021 (2020 – $353) which are recorded as payables.
(c) Credit default swaps
The Company replicates exposure to specific issuers by selling credit protection via credit default swaps (“CDS”) to complement its cash debt securities investing. The Company does not write CDS protection more than its government bond holdings. A CDS is a derivative instrument representing an agreement between two parties to exchange the credit risk of a single specified entity or an index based on the credit risk of a group of entities (all commonly referred to as the “reference entity” or a portfolio of “reference entities”), in return for a periodic premium. CDS contracts typically have a five-year term.
The following table presents details of the credit default swap protection sold by type of contract and external agency rating for the underlying reference security.
 
As at December 31, 2021
 
Notional
amount
(1)
 
 
Fair value
 
 
Weighted
average maturity
(in years)
(2)
 
Single name CDS
(3)
– Corporate debt
                        
A
  
$
16
 
  
$
–
 
    
1
 
BBB
  
 
28
 
  
 
1
 
  
 
2
 
Total single name CDS
  
$
44
 
  
$
1
 
  
 
2
 
Total CDS protection sold
  
$
44
 
  
$
1
 
  
 
2
 
       
As at December 31, 2020   Notional
amount
(1)
     Fair value    
Weighted
average maturity
(in years)
(2)
  
Single name CDS
(3)
– Corporate debt
                        
A
   $ 136     $ 2       1  
BBB
     105       1       2  
Total single name CDS
   $ 241     $ 3       1  
Total CDS protection sold
   $   241     $   3         1  
 
 
(1)
Notional amounts represent the maximum future payments the Company would have to pay its counterparties assuming a default of the underlying credit and zero recovery on the underlying issuer obligations.
(2)
The weighted average maturity of the CDS is weighted based on notional amounts.
(3)
Ratings are based on S&P where available followed by Moody’s, DBRS, and Fitch. If no rating is available from a rating agency, an internally developed rating is used.
The Company held no purchased credit protection as at December 31, 2021 and 2020.
(d) Derivatives
The Company’s
point-in-time
exposure to losses related to credit risk of a derivative counterparty is limited to the amount of any net gains that may have accrued with a particular counterparty. Gross derivative counterparty exposure is measured as the total fair value (including accrued interest) of all outstanding contracts in a gain position excluding any offsetting contracts in a loss position and the impact of collateral on hand. The Company limits the risk of credit losses from derivative counterparties by: using investment grade counterparties, entering into master netting arrangements which permit the offsetting of contracts in a loss position in the case of a counterparty default and entering into Credit Support Annex agreements whereby collateral must be provided when the exposure exceeds a certain threshold. All contracts are held with counterparties rated BBB+ or higher. As at December 31, 2021, the percentage of the Company’s derivative exposure with counterparties rated
AA-
or higher was 17 per cent (2020 – 20 per cent). The Company’s exposure to credit risk was mitigated by $10,121 fair value of collateral held as security as at December 31, 2021 (2020 – $16,696).
As at December 31, 2021, the largest single counterparty exposure, without taking into consideration the impact of master netting agreements or the benefit of collateral held, was $2,132 (2020 – $4,110). The net exposure to this counterparty, after taking into consideration master netting agreements and the fair value of collateral held, was $nil (2020 – $nil). As at December 31, 2021, the total maximum credit exposure related to derivatives across all counterparties, without taking into consideration the impact of master netting agreements and the benefit of collateral held, was $18,226 (2020 – $28,685).
(e) Offsetting financial assets and financial liabilities
Certain derivatives, securities lent and repurchase agreements have conditional offset rights. The Company does not offset these financial instruments in the Consolidated Statements of Financial Position, as the rights of offset are conditional.
In the case of derivatives, collateral is collected from and pledged to counterparties and clearing houses to manage credit risk exposure in accordance with Credit Support Annexes to swap agreements and clearing agreements. Under master netting agreements, the Company has a right of offset in the event of default, insolvency, bankruptcy or other early termination.
In the case of reverse repurchase and repurchase transactions, additional collateral may be collected from or pledged to counterparties to manage credit exposure according to bilateral reverse repurchase or repurchase agreements. In the event of default by a counterparty, the Company is entitled to liquidate the collateral held to offset against the same counterparty’s obligation.
The following table presents the effect of conditional master netting and similar arrangements. Similar arrangements may include global master repurchase agreements, global master securities lending agreements, and any related rights to financial collateral. 
 
 
 
 
 
 
Related amounts not set off in the
Consolidated Statements of
Financial Position
 
 
 
 
 
 
 
As at December 31, 2021
 
Gross amounts of
financial instruments
(1)
 
 
Amounts subject to
an enforceable
master netting
arrangement or
similar agreements
 
 
Financial
and cash
collateral
pledged
(received)
(2)
 
 
Net
amount
including
financing
entities
(3)
 
 
Net
amounts
excluding
financing
entities
 
Financial assets
 
 
 
 
 
Derivative assets
  
$
18,226
 
  
$
(8,410
) 
  
$
(9,522
) 
  
$
294
 
  
$
294
 
Securities lending
  
 
564
 
  
 
–
 
  
 
(564
) 
  
 
–
 
  
 
–
 
Reverse repurchase agreements
  
 
1,490
 
  
 
(183
) 
  
 
(1,307
) 
  
 
–
 
  
 
–
 
Total financial assets
  
$
20,280
 
  
$
(8,593
) 
  
$
(11,393
) 
  
$
294
 
  
$
294
 
Financial liabilities
                                        
Derivative liabilities
  
$
(10,940
) 
  
$
8,410
 
  
$
2,250
 
  
$
(280
) 
  
$
(79
) 
Repurchase agreements
  
 
(536
) 
  
 
183
 
  
 
353
 
  
 
–
 
  
 
–
 
Total financial liabilities
  
$
(11,476
) 
  
$
8,593
 
  
$
2,603
 
  
$
(280
) 
  
$
(79
) 
         
          Related amounts not set off in the
Consolidated Statements of
Financial Position		              
As at December 31, 2020   Gross amounts of
financial instruments
(1)
     Amounts subject to
an enforceable
master netting
arrangement or
similar agreements		     Financial
and cash
collateral
pledged
(received)
(2)
     Net
amount
including
financing
entities
(3)
     Net
amounts
excluding
financing
entities		  
Financial assets
                                        
Derivative assets
   $    28,685     $ (13,243 )    $ (15,323 )    $ 119     $     119  
Securities lending
     889       –       (889 )      –       –  
Reverse repurchase agreements
     716       –       (715 )             1       1  
Total financial assets
   $ 30,290     $ (13,243 )    $ (16,927 )    $ 120     $ 120  
Financial liabilities
                                        
Derivative liabilities
   $ (16,076 )    $ 13,243     $      2,482     $ (351 )    $ (71 ) 
Repurchase agreements
     (353 )      –       353       –       –  
Total financial liabilities
   $ (16,429 )    $ 13,243     $ 2,835     $ (351 )    $ (71 ) 
 
(1)
Financial assets and liabilities include accrued interest of $725 and $902, respectively (2020 – $892 and $1,114, respectively).
(2)
Financial and cash collateral exclude over-collateralization. As at December 31, 2021, the Company was over-collateralized on OTC derivative assets, OTC derivative liabilities, securities lending and reverse repurchase agreements and repurchase agreements in the amounts of $599, $875, $36 and $2, respectively (2020 – $1,373, $627, $74 and $nil, respectively). As at December 31, 2021, collateral pledged (received) does not include
collateral-in-transit
on OTC instruments or initial margin on exchange traded contracts or cleared contracts.
(3)
Includes derivative contracts entered between the Company and its financing entity which it does not consolidate. The Company does not exchange collateral on derivative contracts entered with this entity. Refer to note 17.
The Company also has certain credit linked note assets and variable surplus note liabilities which have unconditional offsetting rights. Under the netting agreements, the Company has rights of offset including in the event of the Company’s default, insolvency, or bankruptcy. These financial instruments are offset in the Consolidated Statements of Financial Position.
A credit linked note is a fixed income instrument the term of which, in this case, is linked to a variable surplus note. A surplus note is a subordinated debt obligation that often qualifies as surplus (the U.S. statutory equivalent of equity) by some U.S. state insurance regulators. Interest payments on surplus notes are made after all other contractual payments are made. The following table presents the effect of unconditional netting.
 
As at December 31, 2021
   Gross amounts of
financial instruments		     Amounts subject to
an enforceable
netting arrangement		     Net amounts of
financial instruments		  
Credit linked note
(1)
  
$
1,054
 
  
$
(1,054
) 
  
$
–
 
Variable surplus note
  
 
(1,054
) 
  
 
        1,054
 
  
 
  –
 
 
As at December 31, 2020   Gross amounts of
financial instruments		     Amounts subject to
an enforceable
netting arrangement		     Net amounts of
financial instruments		  
Credit linked note
(1)
   $     932     $ (932 )    $   –  
Variable surplus note
     (932 )          932       –  
 
(1)
As at December 31, 2021 and 2020, the Company had no fixed surplus notes outstanding, refer to note 18(g).
(f) Risk concentrations
The Company defines enterprise-wide investment portfolio level targets and limits to ensure that portfolios are diversified across asset classes and individual investment risks. The Company monitors actual investment positions and risk exposures for concentration risk and reports its findings to the Executive Risk Committee and the Risk Committee of the Board of Directors.
 
As at December 31,
  
2021
     2020  
Debt securities and private placements rated as investment grade BBB or higher
(1)
  
 
          97%
 
     97%  
Government debt securities as a per cent of total debt securities
  
 
36%
 
     37%  
Government private placements as a per cent of total private placements
  
 
11%
 
     11%  
Highest exposure to a single
non-government
debt security and private placement issuer
  
$
1,167
 
   $ 1,148  
Largest single issuer as a per cent of the total equity portfolio
  
 
2%
 
     2%  
Income producing commercial office properties (2021 – 47% of real estate, 2020 – 53%)
  
$
6,244
 
   $ 6,745  
Largest concentration of mortgages and real estate
(2)
– Ontario
,
Canada (2021 – 28%, 2020 – 28%)
  
$
18,253
 
   $   17,367  
 
(1)
Investment grade debt securities and private placements include 39% rated A, 17% rated AA and 15% rated AAA (2020 – 40%, 16% and 16%) investments based on external ratings where available.
(2)
Mortgages and real estate investments are diversified geographically and by property type.
The following table presents debt securities and private placements portfolio by sector and industry.

 
 
 
2021
 
 
 
 
 
2020
 
As at December 31,
 
Carrying value
 
 
% of total
 
 
 
 
 
Carrying value
 
 
% of total
 
Government and agency
  
$
84,244
 
  
 
32
 
           $ 85,357       33  
Utilities
  
 
48,372
 
  
 
18
 
             47,902       18  
Financial
  
 
38,905
 
  
 
15
 
             35,656       15  
Consumer
  
 
32,671
 
  
 
12
 
             29,684       11  
Energy
  
 
19,637
 
  
 
7
 
             20,963       8  
Industrial
  
 
24,727
 
  
 
9
 
             22,070       9  
Other
  
 
18,425
 
  
 
7
 
             17,850       6  
Total
  
$
 
266,981
 
  
 
100
 
           $
 
 
  259,482       100  
(g) Insurance risk
Insurance risk is the risk of loss due to actual experience for mortality and morbidity claims, policyholder behaviour and expenses emerging differently than assumed when a product was designed and priced. A variety of assumptions are made related to these experience factors, for reinsurance costs, and for sales levels when products are designed and priced, as well as in the determination of policy liabilities. Assumptions for future claims are generally based on both Company and industry experience, and assumptions for future policyholder behaviour and expenses are generally based on Company experience. Such assumptions require significant professional judgment, and actual experience may be materially different than the assumptions made by the Company. Claims may be impacted unexpectedly by changes in the prevalence of diseases or illnesses, medical and technology advances, widespread lifestyle changes, natural disasters, large-scale man-made disasters and acts of terrorism. Policyholder behaviour including premium payment patterns, policy renewals, lapse rates and withdrawal and surrender activity are influenced by many factors including market and general economic conditions, and the availability and relative attractiveness of other products in the marketplace. Some reinsurance rates are not guaranteed and may be changed unexpectedly. Adjustments the Company seeks to make to
Non-Guaranteed
elements to reflect changing experience factors may be challenged by regulatory or legal action and the Company may be unable to implement them or may face delays in implementation.
The Company manages insurance risk through global policies, standards and best practices with respect to product design, pricing, underwriting and claim adjudication, and a global underwriting manual. Each business unit establishes underwriting policies and procedures, including criteria for approval of risks and claims adjudication policies and procedures. The current global life retention limit is US$30 for individual policies (US$35 for survivorship life policies) and is shared across businesses. Lower limits are applied in some markets and jurisdictions. The Company aims to further reduce exposure to claims concentrations by applying geographical aggregate retention limits for certain covers. Enterprise-wide, the Company aims to reduce the likelihood of high aggregate claims by operating globally, insuring a wide range of unrelated risk events, and reinsuring some risk.
(h) Concentration risk
The geographic concentration of the Company’s insurance and investment contract liabilities, including embedded derivatives, is shown below. The disclosure is based on the countries in which the business is written.
 
As at December 31, 2021
   Gross
liabilities		     Reinsurance
assets		     Net liabilities  
U.S. and Canada
  
$
271,090
 
  
$
(42,806
) 
  
$
228,284
 
Asia and Other
  
 
124,398
 
  
 
(1,773
) 
  
 
122,625
 
Total
  
$
395,488
 
  
$
(44,579
) 
  
$
350,909
 
       
As at December 31, 2020   Gross
liabilities		     Reinsurance
assets		     Net liabilities  
U.S. and Canada
   $   273,848     $   (44,645)     $ 229,203  
Asia and Other
     114,878       (1,191 )      113,687  
Total
   $ 388,726     $ (45,836 )    $   342,890  
(i) Reinsurance risk
In the normal course of business, the Company limits the amount of loss on any one policy by reinsuring certain levels of risk with other insurers. In addition, the Company accepts reinsurance from other reinsurers. Reinsurance ceded does not discharge the Company’s liability as the primary insurer. Failure of reinsurers to honour their obligations could result in losses to the Company; consequently, allowances are established for amounts deemed uncollectible. To minimize losses from reinsurer insolvency, the Company monitors the concentration of credit risk both geographically and with any one reinsurer. In addition, the Company selects reinsurers with high credit ratings.
As at December 31, 2021, the Company had $44,579 (2020 – $45,836) of reinsurance assets. Of this, 94 per cent (2020 – 94 per cent) were ceded to reinsurers with Standard and Poor’s ratings of
A-
or above. The Company’s exposure to credit risk was mitigated by $25,466 fair value of collateral held as security as at December 31, 2021 (2020 – $27,360). Net exposure after considering offsetting agreements and the benefit of the fair value of collateral held was $19,113 as at December 31, 2021 (2020 – $18,476).